NEW YORK — May 1, 2024 — Sixth Street Specialty Lending, Inc. (NYSE: TSLX, or the “Company”) today reported net investment income of $0.59 per share and net income of $0.53 per share for the first quarter ended March 31, 2024. These results correspond to an annualized return on equity (ROE) on net investment income and net income of 13.8% and 12.5%, respectively.

Both net investment income per share and net income per share include $0.01 per share of unwind of previously accrued capital gains incentive fee expenses that were accrued, but not paid or payable, related to cumulative unrealized capital gains in excess of cumulative net realized capital gains less any cumulative unrealized losses and capital gains incentive fees paid inception-to-date. Excluding the impact of the partial reversal or unwind of previously accrued capital gains incentive fee expenses, the Company’s adjusted net investment income and adjusted net income for the quarter ended March 31, 2024, were $51.5 million, or $0.58 per share, and $46.7 million, or $0.52 per share, respectively. These results correspond to an annualized return on equity (ROE) on adjusted net investment income and adjusted net income of 13.6% and 12.3%, respectively. The Company’s strong net investment income in the first quarter reflects continued strength of the core earnings power of its portfolio driven by higher interest rates.

Reported net asset value (NAV) per share was $17.17 at March 31, 2024 as compared to NAV per share of $17.04 or an adjusted NAV per share of $16.96 at December 31, 2023 (which accounts for the impact of the $0.08 per share fourth quarter 2023 supplemental dividend). The drivers of this quarter’s NAV per share growth were primarily the continued overearning of the Company’s base quarterly dividend and the accretive equity raised during the quarter.

The Company announced that its Board of Directors has declared a second quarter 2024 base dividend of $0.46 per share to shareholders of record as of June 14, 2024, payable on June 28, 2024, and a first quarter supplemental dividend of $0.06 per share to shareholders of record as of May 31, 2024, payable on June 20, 2024. Adjusted for the impact of the supplemental dividend related to this quarter’s earnings, the Company’s Q1 adjusted NAV per share was $17.11.

As reported last quarter, the Company issued $350.0 million aggregate principal amount of unsecured notes in January that mature on March 1, 2029 (the "2029 Notes").

On March 5, 2024, the Company issued a total of 4,000,000 shares of common stock at $20.52 per share. Subsequent to the offering, the Company issued an additional 600,000 shares on April 1, 2024 pursuant to the overallotment option granted to underwriters. Net of underwriting fees and offering costs, total cash proceeds to the Company were approximately $93.5 million.

On April 24, 2024, the Company completed an amendment to its Revolving Credit Facility, which, among other changes, (a) increased the aggregate commitments under the facility from $1.685 billion as of March 31, 2024 to $1.700 billion and (b) extended the stated maturity date to April 24, 2029 for $1.505 billion of commitments.

Net Investment Income Per Share

Q1 2024:

$0.59

Q1 2024 (adjusted):

$0.58

Net Income Per Share

Q1 2024:

$0.53

Q1 2024 (adjusted):

$0.52

Return on Equity

Q1 2024 (NII):

13.8%

Q1 2024 (NI):

12.5%

Q1 2024 (Adj. NII):

13.6%

Q4 2024 (Adj. NI):

12.3%

NAV

Q1 2024 ($MM):

$1,582.0

Q1 2024 (per share):

$17.17

Q1 2024 (per share, adj):

$17.11

Dividends Declared (per share)

Q1 2024 (Base):

$0.46

LTM Q1'24 (Base):

$1.84

LTM Q1'24 (Supplemental):

$0.25

LTM Q1'24 (Total):

$2.09

For the quarter ended March 31, 2024, new investment commitments totaled $263.6 million. This compares to $316.4 million for the quarter ended December 31, 2023.

For the quarter ended March 31, 2024, the principal amount of new investments funded was $162.8 million across nine new portfolio companies and five upsizes to existing portfolio companies. For this period, the Company had $108.6 million aggregate principal amount in exits and repayments. For the quarter ended December 31, 2023, the principal amount of new investments funded was $277.9 million across nine new portfolio companies and five upsizes to existing portfolio companies. For that period, the Company had $145.4 million aggregate principal amount in exits and repayments.

As of March 31, 2024 and December 31, 2023, the Company had investments in 1001 and 942 portfolio companies, respectively, with an aggregate fair value of $3,380.0 million and $3,283.1 million, respectively. As of March 31, 2024, the average investment size in each portfolio company was $33.51 million based on fair value.

As of March 31, 2024, the Company’s portfolio based on fair value consisted of 92.3% first-lien debt investments, 0.8% second-lien debt investments, 0.9% structured credit investments, 1.2% mezzanine debt investments, and 4.8% equity and other investments. As of December 31, 2023, the Company’s portfolio based on fair value consisted of 91.3% first-lien debt investments, 1.1% second-lien debt investments, 1.7% structured credit investments, 1.2% mezzanine debt investments, and 4.7% equity and other investments.

As of March 31, 2024, 99.6% of debt investments3 based on fair value in the portfolio bore interest at floating rates with 100.0% of these subject to reference rate floors. The Company’s credit facilities also bear interest at floating rates. In connection with the Company’s Unsecured Notes, which bear interest at fixed rates, the Company has entered into fixed-to-floating interest rate swaps in order to align the nature of the interest rates of its liabilities with its investment portfolio.

As of March 31, 2024 and December 31, 2023, the weighted average total yield of debt and income-producing securities at fair value (which includes interest income and amortization of fees and discounts) was 13.8% and 14.1%, respectively, and the weighted average total yield of debt and income-producing securities at amortized cost (which includes interest income and amortization of fees and discounts) was 14.0% and 14.2% for the quarter ended March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024 and December 31, 2023, 1.1% and 0.6% of the portfolio at fair value was on non-accrual status, respectively. One new investment was added to non-accrual status during the quarter.

2024 Origination Activity

Commitments:

$263.6MM

Fundings:

$162.8MM

Net Fundings:

$54.2MM

Average Investment Size1

$33.5MM

(1.0% of the portfolio at fair value)

First Lien Debt Investments (% FV)

92.3%

Floating Rate Debt Investments3

(% FV)

99.6%

Weighted Average Yield of Debt and Incoming-Producing Securities

Yield at Fair Value:

13.8%

Yield at Amortized Cost:

14.0%

Total Investment Income

Total Investment Income

For the three months ended March 31, 2024 and 2023, investment income was $117.8 million and $96.5 million, respectively. The increase in investment income was largely the result of net funding activity.

$117.8MM

Net Expenses

Net Expenses

Net expenses totaled $64.6 million and $53.2 million for the three months ended March 31, 2024 and 2023, respectively. The increase in net expenses was primarily due to the upward movement in reference rates which increased the Company’s weighted average interest rate on average debt outstanding.

$64.6MM

Debt and Capital Resources

As of March 31, 2024, the Company had $35.9 million in cash and cash equivalents (including $29.1 million of restricted cash), total principal value of debt outstanding of $1,877.9 million, and $1,104.6 million of undrawn capacity on its revolving credit facility, subject to borrowing base and other limitations. The Company’s weighted average interest rate on debt outstanding was 7.6% and 7.8% for the three-month periods ended March 31, 2024 and December 31, 2023, respectively. At March 31, 2024, the Company’s debt to equity ratio was 1.19x, compared to 1.23x at December 31, 2023. Average debt to equity was 1.24x for the three-month period ended March 31, 2024, compared to 1.22x for the three-month period ended December 31, 2023.

Total Principal Debt Outstanding

$1,877.9MM

Debt-to-Equity Ratio

Q1 2024 Quarter End:

1.19x

Q4 2024 Average1:

1.24x

Revolving Credit Facility

Unfunded Commitment Activity

Revolver Capacity1

$1,700

Unfunded Commitments (See Note 8 in 12/31/23 10-K)

$316

Drawn on Revolver

($580)

Extinguished Unfunded Commitments

($21)

Unrestricted Cash Balance

$7

New Unfunded Commitments

$105

Total Liquidity (Pre-Unfunded Commitments)

$1,127

Net Drawdown of Unfunded Commitments

($36)

Available Unfunded Commitments2

($260)

Total Unfunded Commitments

$364

Total Liquidity (Burdened for Unfunded Commitments)

$867

Unavailable Unfunded Commitments2

($104)

Available Unfunded Commitments2

$260

Three Months Ended

(unaudited)

March 31, 2024

December 31, 2023

March 31, 2023

Investments at Fair Value

$

3,380.0

$

3,283.1

$

2,918.6

Total Assets

$

3,452.0

$

3,343.8

$

2,972.5

Net Asset Value Per Share

$

17.17

$

17.04

$

16.59

Supplemental Dividend Per Share

$

0.06

$

0.08

$

0.04

Adjusted Net Asset Value Per Share (1)

$

17.11

$

16.96

$

16.55

Investment Income

$

117.8

$

119.5

$

96.5

Net Investment Income

$

52.4

$

54.7

$

42.8

Net Income

$

47.5

$

51.2

$

52.8

Accrued Capital Gains Incentive Fee Expense

$

(0.8

)

$

(0.7

)

$

1.8

Adjusted Net Investment Income (2)

$

51.6

$

54.0

$

44.6

Adjusted Net Income (2)

$

46.7

$

50.5

$

54.6

Net Investment Income Per Share

$

0.59

$

0.62

$

0.53

Net Income Per Share

$

0.53

$

0.58

$

0.65

Accrued Capital Gains Incentive Fee Expense Per Share

$

(0.01

)

$

(0.01

)

$

0.02

Adjusted Net Investment Income Per Share (2)

$

0.58

$

0.62

$

0.55

Adjusted Net Income Per Share (2)

$

0.52

$

0.58

$

0.67

Annualized Return on Equity (Net Investment Income) (3)

13.8

%

14.7

%

12.8

%

Annualized Return on Equity (Net Income) (3)

12.5

%

13.8

%

15.8

%

Annualized Return on Equity (Adjusted Net Investment Income) (2)(3)

13.6

%

14.5

%

13.3

%

Annualized Return on Equity (Adjusted Net Income) (2)(3)

12.3

%

13.6

%

16.3

%

Weighted Average Yield of Debt and Income Producing Securities at Fair Value

13.8

%

14.1

%

13.9

%

Weighted Average Yield of Debt and Income Producing Securities at Amortized Cost

14.0

%

14.2

%

13.9

%

Percentage of Debt Investment Commitments at Floating Rates (4)

99.6

%

99.7

%

99.2

%

March 31,

December 31,

2024

2023

Assets

Investments at fair value

Non-controlled, non-affiliated investments (amortized cost of $3,279,013 and $3,172,853, respectively)

$

3,319,997

$

3,223,152

Controlled, affiliated investments (amortized cost of $80,639 and $78,159, respectively)

60,012

59,913

Total investments at fair value (amortized cost of $3,359,652 and $3,251,012, respectively)

3,380,009

3,283,065

Cash and cash equivalents (restricted cash of $29,100 and $23,979, respectively)

35,890

25,196

Interest receivable

31,258

27,969

Prepaid expenses and other assets

4,865

7,578

Total Assets

$

3,452,022

$

3,343,808

Liabilities

Debt (net of deferred financing costs of $25,258 and $21,930, respectively)

$

1,804,347

$

1,780,307

Management fees payable to affiliate

12,199

11,962

Incentive fees on net investment income payable to affiliate

10,928

11,451

Incentive fees on net capital gains accrued to affiliate

9,601

10,446

Other payables to affiliate

2,701

2,802

Other liabilities

30,240

30,465

Total Liabilities

1,870,016

1,847,433

Commitments and contingencies (Note 8)

Net Assets

Preferred stock, $0.01 par value; 100,000,000 shares authorized; no shares
   issued and outstanding

—

—

Common stock, $0.01 par value; 400,000,000 shares authorized, 92,785,806
   and 88,493,749 shares issued, respectively; and 92,121,556 and 87,829,499
   shares outstanding, respectively

928

885

Additional paid-in capital

1,492,511

1,405,173

Treasury stock at cost; 664,250 and 664,250 shares held, respectively

(10,459

)

(10,459

)

Distributable earnings

99,026

100,776

Total Net Assets

1,582,006

1,496,375

Total Liabilities and Net Assets

$

3,452,022

$

3,343,808

Net Asset Value Per Share

$

17.17

$

17.04

Three Months Ended

March 31, 2024

March 31, 2023

Income

Investment income from non-controlled, non-affiliated investments:

Interest from investments

$

102,407

$

88,434

Paid-in-kind interest income

8,108

3,003

Dividend income

780

608

Other income

4,254

2,757

Total investment income from non-controlled, non-affiliated investments

115,549

94,802

Investment income from controlled, affiliated investments:

Interest from investments

2,230

1,702

Other income

4

1

Total investment income from controlled, affiliated investments

2,234

1,703

Total Investment Income

117,783

96,505

Expenses

Interest

39,032

28,486

Management fees

12,597

10,733

Incentive fees on net investment income

10,928

9,481

Incentive fees on net capital gains

(845

)

1,758

Professional fees

1,751

1,756

Directors’ fees

220

183

Other general and administrative

1,286

1,014

Total expenses

64,969

53,411

Management and incentive fees waived (Note 3)

(398

)

(256

)

Net Expenses

64,571

53,155

Net Investment Income Before Income Taxes

53,212

43,350

Income taxes, including excise taxes

850

413

Net Investment Income

52,362

42,937

Unrealized and Realized Gains (Losses)

Net change in unrealized gains (losses):

Non-controlled, non-affiliated investments

(9,315

)

11,754

Controlled, affiliated investments

(2,381

)

(6,204

)

Translation of other assets and liabilities in foreign currencies

4,727

(1,004

)

Interest rate swaps

—

231

Total net change in unrealized gains (losses)

(6,969

)

4,777

Realized gains (losses):

Non-controlled, non-affiliated investments

2,234

4,814

Foreign currency transactions

(109

)

424

Total net realized gains (losses)

2,125

5,238

Total Net Unrealized and Realized Gains (Losses)

(4,844

)

10,015

Increase (Decrease) in Net Assets Resulting from Operations

$

47,518

$

52,952

Earnings per common share—basic and diluted

$

0.53

$

0.65

Weighted average shares of common stock outstanding—basic and diluted

89,032,381

81,400,843

Three Months Ended

($ in millions)

March 31, 2024

March 31, 2023

New investment commitments:

Gross originations (1)

$

5,128.5

$

1,079.4

Less: Syndications/sell downs (1)

4,864.9

903.3

Total new investment commitments

$

263.6

$

176.1

Principal amount of investments funded:

First-lien

$

154.5

$

130.2

Second-lien

2.1

5.0

Mezzanine

1.1

0.7

Equity and other

4.1

1.4

Structured Credit

1.0

1.6

Total

$

162.8

$

138.9

Principal amount of investments sold or repaid:

First-lien

$

80.4

$

50.3

Second-lien

—

—

Mezzanine

—

—

Equity and other

0.3

0.5

Structured Credit

27.9

—

Total

$

108.6

$

50.8

Number of new investment commitments in
   new portfolio companies

9

7

Average new investment commitment amount in
   new portfolio companies

$

24.4

$

21.6

Weighted average term for new investment
   commitments in new portfolio companies
   (in years)

6.4

5.3

Percentage of new debt investment commitments
   at floating rates

98.7

%

99.6

%

Weighted average interest rate of new
   investment commitments

11.8

%

12.4

%

Weighted average spread over reference rate of new
   floating rate investment commitments

6.6

%

7.6

%

Weighted average interest rate on investments
   fully sold or paid down

12.9

%

12.6

%